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Trusts have for centuries provided an opportunity for trustees to provide some form of benefit to a beneficiary, whilst retaining a level of control and order to the way in which that benefit is provided.
There are many different types of trusts, including arrangements where beneficiaries are mentioned by name, as well as Discretionary Trusts with wide classes of potential beneficiaries. Each trust will have its own Deed, governing the parameters of its use and form.
What is the register?
As part of the recent Money Laundering regulations 2017 coming into force, it will be necessary for the trustees of most UK trusts to maintain a register of, and report to HMRC on, the beneficial owners in relation to the trusts they administer. Beneficial owners include the settlor of the trust, the trustees, named beneficiaries and details of the classes of unnamed beneficiaries.
When are the deadlines?
The trustees are required to maintain accurate and up to date records of the beneficial owners and report to HMRC by the 31st January 2018 where the trust is UK resident and is liable to UK tax. If the trust is not currently subject to any UK taxes it must report by the 31st January following the first tax year in which a UK tax charge arises.
Once reported, HMRC will maintain a register containing the information, which will only be available to UK law enforcement bodies and not the public, as this has to do with Money Laundering regulations.
What are some of the considerations?
What is proving to be something of a headache is dealing with some of the natural questions that arise in considering the information that would need to be obtained from those parties to the trust. One of the most sensitive of which could be the need to get certain information (National Insurance number / Tax reference number) from a named beneficiary of a Discretionary Trust, where they are either not currently receiving any benefit from the trust and may well not even know they are a potential beneficiary. This is less of an issue where a class of beneficiaries is named, rather than an individual, as the class just needs to be detailed.
As a trustee, what should I do?
The reporting deadline is only a few months away and these requirements do not seem to have received much press coverage to date. Also, the actual ability to file online is yet to be finalised, so we will have to wait and see the flow of registration and whether that brings any further questions. It is likely that this will gather momentum in the weeks ahead and certainly once any further information is published.
We are sure there will be many questions being asked, with many professional advisers to trusts, such as Accountants, Solicitors and Financial Advisers, trying to answer them in the weeks ahead. The key will be to ensure there is sufficient time to act, before the 31st January 2018 deadline. With the penalties for non-compliance including fines and potential imprisonment, it is important for trustees not to ignore their duties, under these new regulations.